Works-contract tax liability turns on original contract terms and transfer of goods, not mere subcontracting arrangements.

In a works-contract assessment under the Bengal Finance (Sales Tax) Act, liability depended on the true nature of the contract and the transfer of property in goods involved in execution of the work. For the relevant period, there was no statutory basis to shift the main contractor's liability merely because erection and installation work had been subcontracted, and no reliable proof showed that tax had already been paid by the sub-contractor on the same transaction. Because the original contracts and supporting materials were not properly examined, the assessment and confirming orders could not safely stand on the existing record and required fresh consideration after production of the relevant documents.

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Issues: (i) Whether the contractor could avoid liability under section 6D of the Bengal Finance (Sales Tax) Act, 1941 on the footing that the erection and installation portion of the work had been executed by a sub-contractor and had already suffered tax in the sub-contractor's hands. (ii) Whether the assessment and the appellate and revisional orders could be sustained when the original contracts and material bearing on the true nature of the transaction were not properly examined.

Issue (i): Whether the contractor could avoid liability under section 6D of the Bengal Finance (Sales Tax) Act, 1941 on the footing that the erection and installation portion of the work had been executed by a sub-contractor and had already suffered tax in the sub-contractor's hands.

Analysis: The relevant assessment period preceded insertion of section 6D(3A), which later provided a statutory mechanism for deduction of the sub-contractor's transfer price where tax had been paid by the sub-contractor and supporting documents were produced. For the period in question, there was no statutory basis for shifting the main contractor's liability merely because a part of the work had been entrusted to another. In addition, no reliable material established payment of tax by the sub-contractor in respect of the same transaction.

Conclusion: The plea that liability could be shifted to the sub-contractor failed, and the contractor was not exempt from liability on that ground.

Issue (ii): Whether the assessment and the appellate and revisional orders could be sustained when the original contracts and material bearing on the true nature of the transaction were not properly examined.

Analysis: Liability under section 6D depended on the real nature of the underlying contract and whether there was taxable transfer of property in goods involved in execution of the works contract. That determination had to rest on the terms of the original contracts and surrounding circumstances, not merely on invoices or late-stage assertions. As the original agreements and relevant supporting documents were not properly scrutinised, a definitive finding on the taxability of the transaction could not safely be recorded on the existing material.

Conclusion: The assessment could not be upheld on the existing record and required fresh adjudication after giving the contractor an opportunity to produce the original contracts and supporting documents.

Final Conclusion: The impugned assessment and confirmatory orders were set aside and the matter was sent back for rehearing and reassessment in accordance with law, with opportunity to adduce the necessary documents and be heard.

Ratio Decidendi: In a works-contract assessment, tax can be levied only on the transfer of property in goods involved in execution of the contract, and the liability must be determined from the original contract terms; absent a statutory provision then in force, the main contractor cannot shift that liability to a sub-contractor merely because part of the work was subcontracted.

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